Window Dressing by Pension Fund ManagersThis paper takes a first look at investment strategies of managers of 769 pension funds, with total assets of $129 billion at the end of 1989. The data show that managers of these funds tend to oversell stocks that have performed poorly. Relative sales of losers accelerate in the fourth quarter, when funds' portfolios are closely examined by the sponsors. This result supports the view that fund managers "window dress" their portfolios to impress sponsors and suggests that managers are evaluated on their individual stock selections and not just aggregate portfolio performance. |
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1050 Massachusetts Avenue 20 percent 3617 NATIONAL BUREAU aggregate fund Andrei Shleifer Richard availability of stocks average over funds average over quarters Average Quarterly Bureau of Economic buy losers compute contrarian CRSP universe DRESSING BY PENSION Economic Research end of quarter Equity Holdings evidence extreme losers extreme winners forms of window fourth quarter fund buys fund evaluations funds hold Joshua D Krueger losers and sell losers relative MANAGERS Josef Lakonishok market capitalization Michael D million Models money managers NBER oversell PAPER SERIES WINDOW PENSION FUND MANAGERS Percent of Total performance categories performance group previous quarter purchases and sales purchases of losers Quarter 1-3 Quarter Quarter 4 Quarter Quintile as Percent relative to holdings result Richard Thaler Robert rid of mistakes sale of losers sale of winners sales and purchases sales relative sell losers selling intensity Shleifer Richard Thaler small funds t-test Quarter 1-3 Thaler Robert Vishny universe holdings Xavier Sala-i-Martin